Monday, July 16, 2007

They Just Won't Grow Up!

Another boomerang kid story-- this one notes up high the impact of "economic necessity," student loans and credit card debt (with an old 2002 stat; the latest number is lower).But personal finance experts can't agree: are you really helping your offspring in the long run? What about your own retirement?

This is my own personal biased opinion: I think living at home is OK if the younger person has a plan, because it is self-limiting; annoying for both sides. Paying rent so they can live in the city is not. It creates a false sense of independence, removing the incentive to save or budget (not to mention it ruins neighborhoodsnow full of trust fund kids). My first year out of college, my parents paid for, not my rent, but my health insurance. That was really looking out for me.

I like your parents idea of helping with Health Insurance. It doesn't directly help you, but if it did it would have been a blessing to have.

Here in Canada we don't have much of an issue with that since half of our income goes to taxes to cover things like that.

I've opened education accounts for my kids that, if educaton costs rise at their current pace, should pay for about half of the education. Past that my kids will be on their own. They need the loans to learn how to take care of finances. Better student loans than car loans, at least one you get something that lasts a lifetime.

Myself, I moved out after college and then moved home again after running out of money. I stayed home for another year or so and then back out I went. Without family support probably would have been living on the street.

Hi Anya,I have a question/suggestion for you. I took a "nontraditional" route through college. After two years, due to a lot of factors, I took time off, and returned after 3 years to the original institution, where I finished. While there were drawbacks to the decision, in my time off I gained some interesting experiences and fluency in a foreign language. I've now paid off all my student loans, by the way : ). I am in Israel right now doing a master's degree. Here, most people go to the army after high school for 2-4 years, then work to earn some money, then travel before starting college. I think that a similar plan would be a good idea for many Americans as well. Part of the issue of student loans for me is that students acquire them before they understand the value of money. Practically the first thing I had to do when I went away to school was to sign the loan form. I had never thought about school as an investment, just as something that everyone told me that I needed to do. And money was a taboo subject in my home while growing up. I didn't have a clue how to form a career or how much different jobs paid.If young people had a little more time in the world to earn a living and see a different culture before going to college, maybe they would look at debt more productively. They also might feel more personal responsibility for their debt. They might also make different choices in majors. While at Harvard it doesn't matter that much what you major in, for most of us it does. The US has a shortage of engineering types and I wonder if part of that isn't because smart young kids don't even consider it. If they were a tiny bit older when entering school they would understand the trade-offs with hard work and pay.What is your take on the idea of encouraging some kids to take time off to work and travel before entering college?Best regards,Liz